Fremont General Corp. (FMT), which is seeking a buyer for its subprime mortgage unit after federal regulators ordered it to stop risky lending, said Wednesday that it was selling $4 billion of subprime mortgages, resulting in a $140 million pretax loss.

The Santa Monica, Calif.-based company's shares rose as much as 19 percent because the loss was smaller than investors expected.

Fremont said it expected to complete the sales in the next several weeks and received $950 million in cash from a first installment. It did not identify the buyers. The loss suggests that the company priced the loans at about 97 cents on the dollar.

"It's a huge positive and a big step toward exiting the subprime business," said Fox-Pitt, Kelton Inc. analyst Matt Howlett. "The market was expecting a much bigger loss. Also, with this sale, Fremont doesn't have to keep the loans on its balance sheet, which could have created bigger losses."

Subprime lenders, which make home loans to borrowers with poor credit histories, are struggling from rising delinquencies and defaults. Many are selling subprime units, and more than two dozen have quit the sector in the last year.

Last Friday, San Diego subprime lender Accredited Home Lenders Holding Co. said it would sell $2.7 billion of loans, resulting in a $150 million pretax charge. Its shares rose 15.6 percent that day.

Fremont this month stopped making residential loans and has hired Credit Suisse to help sell its Fremont Investment & Loan, subprime unit.

Earlier this month, Fremont said it would comply with a Federal Deposit Insurance Corp. order barring it from risky lending. It also notified some of the 2,400 people in its subprime unit that they would lose their jobs on May 18.

The company is still operating its commercial real estate lending operations and accepting deposits.

Howlett said Fremont's mortgage sale plan "demonstrates there is plenty of liquidity in the market for subprime loans, and increases the changes that Fremont can sell its lending platform cleanly."

Separately, Chicago-based Citadel LP, which runs one of the world's largest hedge funds and was created by billionaire investor Kenneth Griffin, said it had taken a 4.5 percent stake in Accredited.

On Tuesday, Accredited said it had received a $200 million loan from San Francisco hedge fund Farallon Capital Management LLC, which has a 6.9 percent stake.

In morning trading, Fremont shares were up $1.04, or 11.9 percent, at $9.82 after rising to $10.45. Accredited rose 84 cents, or 7.8 percent, to $11.61.